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  I. What Happened? The Supreme Court of India recently delivered a significant judgment regarding the enforceability of employment bonds. The matter arose when an employee of Vijaya Bank, Prashant B Narnaware, was required to pay Rs. 2 lakhs to the Bank after resigning before completing the stipulated three-year minimum service period, as per the terms of his appointment. The High Court had earlier invalidated this clause, but the Supreme Court reversed that decision, holding that such contractual provisions are not void for being in restraint of trade. II. Background Under Section 27 of the Indian Contract Act, 1872, any agreement that restrains a person from exercising a lawful profession, trade, or business is generally void, except in limited situations such as the sale of goodwill. The legal issue in this case was whether an employment bond, which requires an employee to serve a minimum period or pay liquidated damages if they resign early, violates this provision or is other...

The Supreme Court of India, in the case of Vijaya Bank & Anr. v. Prashant B Narnaware (Civil Appeal No. 11708 of 2016, judgment dated 14 May 2025), addressed the enforceability of an employment bond that required an employee to pay liquidated damages if they resigned before completing a stipulated minimum service period. The respondent, who initially joined Vijaya Bank as a Probationary Assistant Manager in 1999 and was later promoted, applied for and was appointed to the post of Senior Manager—Cost Accountant in 2007. The appointment was subject to a condition, as stated in Clause 11(k) of the appointment letter, that mandated a minimum service of three years, failing which the employee was required to pay an indemnity of ₹2 lakhs. The respondent accepted the condition, executed the required bond, and joined the new post. However, before completing three years, he resigned to join another bank and, under protest, paid the stipulated amount to Vijaya Bank. Subsequently, the respond...